Following an IMF-backed tariff cut, car prices are predicted to decline.

An agreement has been struck between Pakistan and the International Monetary Fund (IMF) to cut the weighted average tariffs of the nation by half, from the present rate of 10.6 percent to 6 percent over the next five years.

By making Pakistan the nation with the lowest tariffs in South Asia, this calculated effort aims to increase foreign competition in the country’s economy.

The cut is anticipated to directly affect local auto prices, which are predicted to fall due to lower import and associated expenses in the automotive industry.

With the ultimate objective of reaching a 6 percent rate by 2030, the tariff reductions will go into effect in July 2025.

The National Tariff Policy, which seeks to lower tariffs to 7.4 percent by 2030, and the Auto Industry Development and Export Policy (AIDEP), which calls for even more reductions in the automotive sector, will serve as the two main frameworks under which this new policy will be implemented. The tariff will now be set at 7.4 percent, which is little higher than the earlier objective of 7.1 percent, excluding the automobile industry.

Notably, the policy will also result in the removal of various concessions under the fifth schedule of the Customs Act, an 80 percent reduction in regulatory duties, and the total elimination of additional customs duties.

Additionally, beginning in July of this year, a 2 percent duty on zero-tariff slabs and a 7 percent additional customs duty on specific commodities will be eliminated.

The federal government has committed to a 6 percent target, notwithstanding the IMF’s initial proposal to lower the weighted average tariff to 5 percent. Before the end of June, the federal cabinet is anticipated to accept the new tariff policy, which will then be fully implemented in the 2025–2026 budget.

By 2030, all extra customs and regulatory levies pertaining to the automobile industry are expected to be eliminated, with a 20 percent import tariff cap. Significant cuts of 55 to 90 percent will be made to the regulatory duties on automobiles in the first year, with additional reductions to follow in the following years. Along with the steady reduction of current tariffs on various slabs, a new 6 percent customs duty slab will also be created.